Des Moines Mut. Hail & Cyclone Ins. Ass'n v. Steen

• Decision Date: 18 September 1919
• Citation: 175 N.W. 195,43 N.D. 298
• Court: North Dakota Supreme Court
• Parties: DES MOINES MUT. HAIL & CYCLONE INS. ASS'N v. STEEN et al.

43 N.D. 298

175 N.W. 195

DES MOINES MUT. HAIL & CYCLONE INS. ASS'N

v.STEEN et al.

Supreme Court of North Dakota.

Sept. 18, 1919.

Syllabus by the Court.

As a general rule, interest earned on a fund belongs to the owner of the fund. It is held that moneys deposited by a foreign mutual hail insurance company under section 4896 et seq., Comp. Laws 1913, belongs to the insurance company making the deposit, and that all interest earned on the fund while on deposit with the state treasurer becomes a part of the fund and belongs to the owner thereof.

Appeal from District Court, Burleigh County; W. L. Nuessle, Judge.

Action by the Des Moines Mutual Hail & Cyclone Insurance Association against John Steen, John Steen as Treasurer of the State of North Dakota, and the State of North Dakota. Judgment for plaintiff, and Steen and the State of North Dakota appeal. Affirmed.

Grace, J., dissenting.Theodore Koffel, of Bismarck, for appellant Steen.

William Langer, Atty. Gen., and Geo. K. Foster, Asst. Atty. Gen., for the State.

Sullivan & Sullivan, of Mandan, for respondent.

ROBINSON, J.

This is an appeal by John Steen and by the state of North Dakota from a judgment against them, in favor of the insurance company, for $1,250 and interest at 6 per cent. The $1,250 is the accrued interest received on $25,000, which the insurance company deposited with John Steen in March, 1913, as security for loss. The deposit was under the statute. Comp. Laws 1913, § 4896. The interest money was claimed by the state and by John Steen, and each appealed from the judgment. On the pleadings and the conceded facts the trial court found that John Steen received interest on the deposit amounting to $1,250, that the same is the property of the plaintiff, and that judgment should be given for same in favor of the plaintiff and against each of the claimants. On April 14, 1916, judgment was entered accordingly. By statute it is provided thus: So long as the deposit required by this article is kept good and the depositing company is solvent, the state treasurer may permit the company to collect interest on the securities so deposited. Section 4900.

Counsel for Steen and the state contend that this statute does not apply to the withdrawal of interest money. Hence, he says, there is absolutely no duty on the part of the state treasurer, the state, nor any one else to return the whole or any part of the $25,000, or the interest, to the company, unless such duty is created by the statute. That is an extremely narrow view of the legal and moral duty of a depositary. The counsel forgets that, when one gets hold of money or property of another, unless he has a legal right to it, he is bound to return it, regardless of any statute; he is bound to return to the owner, if known, money or property that he finds or picks up in the street, though the statute does not provide that he must do so; and, of course, it is not for the state in such a case to play tweedledum and tweedledee by claiming and insisting on the money and then appealing and objecting to the form of the judgment. The state might well have disclaimed the money, and then there would have been no judgment against it. Now, it is manifest that the accruing interest follows the principal, and that, when the insurance company concluded to retire from doing business in the state, it was entitled to its money, the $25,000, with the accrued interest. There is no principle of law or equity on which either Steen or the state can justly make any claim to the interest. True it is that the ex-treasurer was not legally obliged to put the money at interest, but he was under a moral obligation to do it. In the parable of the talents, the person with one talent hid it in the earth, and on the return of his Lord he dug it up and said: “Lo! Here thou hast what is thine.” For this he was subjected to severe punishment. So, in disregard of the rights of others, the ex-treasurer might have buried or put in a vault the $25,000. The manly, moral, and proper thing for him to do was to put it safely at interest, and then to pay over the accrued interest, with the principal. The judgment in favor of the depositor is clearly right.

Judgment affirmed.

CHRISTIANSON, C. J. (concurring specially).

Section 4896, C. L. 1913, provides:

“No mutual insurance company hereafter organized under the laws of this state or now or hereafter organized under the laws of any state or country, shall engage in the business of hail insurance in this state without first depositing and thereafter keeping on deposit with the treasurer of this state the sum of twenty-five thousand dollars in money, or in lieu thereof bonds of this state or of the United States of the par value of twenty-five thousand dollars; provided, that domestic mutual hail insurance companies in lieu of said deposit shall be required to file a bond in the office of the commissioner of insurance in the sum of twenty-five thousand dollars, conditional for the carrying out of its contracts and obligations incurred by its policies; said bond to be satisfactory as to form and surety to the insurance commissioner.”

Section 4897 provides that:

“Said money or securities so deposited shall be and remain in the hands of the treasurer of this state as a fund to secure the payment of all losses occurring under all policies or contracts for hail insurance, made by such company in this state, or covering property situated within the state. And the treasurer of this state shall not permit said deposit or any part thereof to be withdrawn by said company from his custody except as hereinafter provided.”

Section 4899, C. L. 1913, provides that when any company which has made such deposit desires to relinquish the transaction of business in this state, it may be permitted to withdraw such deposit upon application to the commissioner of insurance; that when the commissioner of insurance becomes satisfied that all liabilities under policies and contracts have been fully paid and extinguished, he shall “file a certificate to that effect with the treasurer of this state, who shall thereupon deliver such deposit to said company, or its assigns.”

In March, 1913, plaintiff deposited $25,000 in cash with the state treasurer, under the provisions of section 4896, supra. The defendant, Steen, was elected state treasurer at the general election held in November, 1914. Upon his qualification in January, 1915, his predecessor in office turned over to him the said sum of $25,000. Steen afterwards deposited these moneys in various banks. The plaintiff subsequently withdrew from the state, and was permitted to withdraw its deposit. The defendant, Steen, turned over to it the amount of the original deposit. The plaintiff, however, insisted that it was also entitled to receive whatever interest had been earned thereon. From statements made upon the oral argument it appears that Steen submitted the matter to the then Attorney General, and was advised that considerable uncertainty existed as to who was entitled to such interest, and that it belonged either to the plaintiff, to the state, or to the defendant Steen personally. This action was thereupon brought. The action was originally against Steen individually and as state treasurer; later the state of North Dakota was added as a party defendant. The matter was submitted to the court upon the pleadings. The trial court ordered judgment for the plaintiff. The state and Steen have both appealed, so the entire controversy is before this court.

The questions presented in this case are somewhat perplexing. The various authorities cited by counsel for the contending parties are of little or no value, for they deal with entirely different situations. There are many authorities dealing with the right of state treasurers and other custodians of public funds to receive and appropriate to their own use interest on such funds. The conclusions reached by the various courts are far from uniform. Some of the cases hold that it is not a matter of public concern what use was made of the moneys while in the hands of the treasurer, that he is liable for the principal alone, and that his liability ceases when he accounts for the principal. See Rock v. Stinger, 36 Ind. 346;Shelton v. State, 53 Ind. 331, 21 Am. Rep. 197;Com. v. Godshaw, 92 Ky. 435, 17 S. W. 737;State v. Walsen, 17 Colo. 170, 28 Pac. 1119, 15 L. R. A. 456;Maloy v. Bernalillo, 10 N. M. 638, 62 Pac. 1106, 52 L. R. A. 126; Renfroe v. Colquitt, 74 Ga. 618; Chase v. Monroe, 30 N. H. 427, 433. Other cases hold that where the treasurer has received interest on public funds he must account for the interest as well as for the principal. See cases cited in note to Adams v. Williams, 30 L. R. A. (N. S.) 855.

Counsel for the plaintiff and for the state have cited and rely upon these latter decisions. While they tend to support the contentions of the plaintiff, they clearly do not support the contentions of the state, for these cases merely hold that the interest follows the principal, and that where a custodian has received interest on funds belonging to the public he must pay such interest over to the owner of the money on which the interest has been earned. But the moneys involved in this case were not state funds. They did not belong to the state. They belonged to the plaintiff. The plaintiff had placed them in the hands of the depositary designated by the Legislature, to be held as security for the payment of losses which might arise upon insurance contracts made by the plaintiff. The money would eventually either be returned to the plaintiff, or paid to those for the protection of whom it was deposited. Under no circumstances would the state of North Dakota become the owner of the moneys. The state treasurer was custodian of the moneys because the Legislature had designated him. The Legislature might as well, if it had seen fit to do so, requiredthe deposit to be made with some other state or county official,...